National Grid 2008 Annual Report Download - page 566

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 51403
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 47
Description: EXHIBIT 15.1
0/4243.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/243/4*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 51403
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 47 Description: EXHIBIT 15.1
0/4243.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/243/4*
Table of Contents
Annual Report and Accounts 2007/08
55
We also have a number of service standards for our
operations. These vary between our rate plans but include
such measures as: reliability levels; responsiveness to gas
emergency calls; customer satisfaction levels; customer
complaints; customer meter reading performance; customer
call answering; enrolment of customers into the low income
customer assistance programme; outstanding gas leaks
requiring repair; and other measures. Many of these service
standards have penalties if we do not achieve certain
specified minimum standards.
Current and future developments
In addition to the current and future developments described
on pa
g
es 22 and 23, the followin
g
developments are relevant
to the Gas Distribution business.
Acquisition of KeySpan
The most si
g
nificant development for Gas Distribution durin
g
the year was the acquisition of KeySpan, which substantially
expanded the size of our activities in the US, with the
addition of gas distribution networks in New York City, Long
Island, Massachusetts and New Hampshire to our existing
upstate New York and Rhode Island operations.
UK regulatory price control reviews
Ofgem extended the previous five year gas distribution price
controls for a further year to cover the year ending 31
March 2008. The principal impact of these one year price
control extensions is to increase prices by approximately
11% and to reduce the seasonality of revenues. In addition,
the balance between fixed and variable elements in our
revenue chan
g
ed, reducin
g
the impact that volume chan
g
es,
including weather, had on our revenue in 2007/08 compared
with previous years.
On 18 December 2007 we accepted Ofgem’s final proposals
for new price controls with respect to our role as owner and
operator of four of the eight gas distribution networks in
Great Britain, covering the period from 1 April 2008 to 31
March 2013. The key elements of these proposals are a
4.3% post-tax real rate of return on our regulatory asset
value, a £2.9 billion baseline five year capital expenditure
allowance and a £1.9 billion five year operating expenditure
allowance.
Rhode Island gas rate plan filing
Followin
g
the acquisition of the Rhode Island
g
as distribution
network from Southern Union Company on 24 August 2006
rates were frozen for one year. We filed a request on 1
April 2008 with the Rhode Island Public Utilities Commission
for a $20.4 million (£10.3 million) rate increase, representing
a 4.6% increase on a
Equity Equity to Sharing
Rate plan return debt ratio arrangements
New York Cit
y
9.8% 45/55 100% to 10.5%, 50% to
and Lon
g
Island 12.5%, 35% to 13.5%,
nil above 13.5%
Upstate New York 10.6% 42/58 100% to 10.6%,
50% above 10.6%
Boston, MA 10.2% 50/50 100% up to 14.2%,
75% above 14.2%
Essex, MA 11.2% 55/45 None
Colonial, MA 11.2% 46/54 None
Rhode Island 11.3% 44/56 None
New Hampshire 10.4% 49/51 None
total bill basis. The filing includes a revenue decoupling
proposal, a gas marketing programme, a discrete funding
mechanism for an accelerated bare-steel and cast-iron
mains replacement programme, a new rate for low-income
customers, and full reconciliation of commodity related bad
debt expense.
Upstate New York gas rate plan filing
We plan to file with the New York Public Service
Commission on 23 May 2008 for an $84 million (£42 million)
rate increase in natural gas delivery rates, representing a
9.6% increase on a total bill basis. The filing includes a
revenue decouplin
g
proposal, a
g
as marketin
g
pro
g
ramme, a
new rate for low-income customers, and full reconciliation of
commodity related bad debt expense. The filing also seeks
recovery of $11 million (£6 million) of costs associated with
an energy efficiency programme proposal submitted to the
Commission on 30 April 2008.
New Hampshire gas rate plan filing
On 25 February 2008, we filed a request with the New
Hampshire Public Utilities Commission to increase
distribution rates by approximately $9.9 million (£5 million).
The filing marks the first request for an increase in
distribution rates in 15 years and is necessary to fund
ongoing operations and significant infrastructure
improvements. If the request is approved, the typical
residential heatin
g
customer will experience a 6.4% increase
in total monthly bill. The average increase for all rate
classifications and usage levels is 5.6%. We have requested
that a portion of the increase be put into effect in
August 2008, with the remainder implemented in
February 2009. If approved, the provision for a temporary
rate increase would result in an average initial increase of
3.75%. The filing also includes a commitment on the part of
the Company to improve emer
g
ency response times and call
answering times and reflects annual permanent savings to
consumers of $619,000 (£313,000) realised as a result of
National Grid’s acquisition of KeySpan.
Performance against our objectives
Descriptions of our progress against our overall objectives in
the areas of delivering our strategy, operating performance,
talent, relationships, environment, financial performance and
responsibility are set out on pages 24 to 43. We include
below further information specific to Gas Distribution with
respect to the progress we have made on delivering our
strategy, our operating performance and our financial
performance.
Delivering our strategy
Following the acquisition of KeySpan in August 2007, we
have integrated our newly acquired gas networks in New
York City, Long Island, Massachusetts and New Hampshire
with those of our existin
g
g
as networks in upstate New York
and Rhode Island and our four gas distribution networks in
England to create a single Gas Distribution business
operating in both the UK and the US.
A new management team for the enlarged business has
been appointed, reporting to Mark Fairbairn, the Executive
Director
Key areas
of focus
Our objective is to utilise the scale and breadth of
our enlarged Gas Distribution operations, together
with the benefits of common support services, to
drive improvements in our operating and financial
performance. In particular, we aim to adopt best
p
ractices across Gas Distribution.